how do people own homes in countries where the mortgage doesn’t exist?
In: Economics
They pay in cash.
Often, and I know the issues in Argentina best, they buy land for a house and then use their cash to build a small house. Then in a few years they expand it, for a few years. Finally they sell it and use the big wad of cash to buy their next house.
It makes a lot more people renters.
I am in the US, my grandparents never had a loan. They saved up until they could pay for something. But they also raised 6 children (and lost 2) during the Great Depression. After the Depression & WWII lots of things changed and over time a mortgage became the norm.
Three main ways and it depends on the state of development in the country.
The first is the obvious option. Buying land with cash and paying to build a house. This might sound insane to many people but land doesn’t have the same value everywhere, and more specifically not all places have the same income to cost of land/development ratio. Basically what this means is that in some countries, being middle class and saving up for 20-30 years can leave you with enough money to be able to build a house out of pocket. It can even happen sooner if someone makes above average money, or their spouse makes decent money too, or multiple family members chip in. In Europe this was very common during post war development.
The second way is through a Ground Lease agreement with developers (I might have the term wrong). These were/are popular in areas/countries that do not have an economy that can easily sustain massive development firms and where most land is owned by people rather than companies. As such developers are much smaller scale companies which prefer to employ this method instead of buying land and then developing it. Basically the developer approaches the owner of a plot of land and offers to build on it. In return the owner retains a percentage of ownership of the building and the developer gets to sell or rent the rest of it. This is most commonly used for apartment buildings where the land owner gets to keep some apartments and the developers can sell or rent the rest. Usually this land is left over in families from their grandparents or earlier, from times when it used to be usable farmland but has eventually been built around and enveloped by urbanisation, meaning it can’t be farmed any more but the family may lack the capital to develop it.
The last option derives mainly from the conditions that enable the other two methods. Inheritance. Just as people may inherit an empty plot, they might also inherit an apartment, or multiple apartments, or a whole detached house. If land is mainly owned by individuals and not companies, every house you see is owned by someone, and eventually that someone will leave it to someone else. As long as the owners don’t get themselves in massive debt, it’s safe to assume the house will remain with the family for many years.
I live in acountry on perpetual state of crysis and where credit is inexistent, 90% of people I know who got a house, they literally inherit it (or the money to buy it), the other 10% got em by goverment programs almost for free. The rest of the people just waits for one of those miracles happens to them someday.
I think people often forget how in the USA, as little as 20 years ago, owning a home was not an easy thing to accomplish for most people. Even with mortgages, you generally needed generational wealth or it was a serious accomplishment to do without. There used to be the idea that you’d save up for decades to buy a house, because even having $30,000 cash down payment on a $100k mortgage is quite the thing! How many people can say they’ve literally had 30 grand in savings at any point in their lives? And that’s for only a 100k house! And then the idea of “credit” was a black art.
Likewise, in other countries without a similar financial system to ours, it’s usually generational wealth. And that’s why it’s much more common for larger families to live together and for people to build their own houses by hand and cobbling together additions.
As Canada is one of the largest money laundering jurisdictions on the planet, mortgages are required in conjunction with bankers and realtors in order to make housing an investment commodity. In some other countries, houses are merely shelter and thus affordable.
My boyfriend’s dad in Russia bought his apartment with a suitcase full of cash. Traveled by train from Kurgan to St. Petersburg, sweating bullets.
I’m confused… There are countries where property backed loans don’t exist?
In Islamic countries where lending money for interest is still against the rules, instead of a Western-style mortgage, the bank buys the property on your behalf and becomes the legal owner. You make monthly payments to eventually buy the property off them, and you pay them some rent on top. The rent amounts to much the same as the interest payments would be.
In Vietnam, you can either buy a piece of land and build your house on it, or buy an apartment. In most less developed provinces, those lands are inherited or can be bought with a fair price. In the biggest cities, most now can only afford apartments, and use something similar to the mortgage pay.
Latest Answers